Paris | Banks in Cyprus may finally open their doors on Thursday after being shuttered for almost two weeks, in the wake of the Mediterranean nation’s financial sector meltdown and €10 billion ($12.3 billion) bailout – but with draconian capital controls in place.

Government officials in Nicosia, who have already imposed daily cash withdrawal limits of €100 in recent days, are anxiously trying to prevent a massive bank run following the harsh rescue package terms agreed with Brussels, the International Monetary Fund and the European Central Bank.

This could include seizures of up to 40 per cent of deposits of over €100,000, under the plan to fold the failing Laiki bank and restructure the Bank of Cyprus.

The details of restrictions on customers taking out cash and transferring funds are still being finalised but Finance Minister
Michael Sarris
confirmed the limits would probably stay in place for seven days and would not ‘‘cripple the economy’’.

Sceptics, however, say trying to control the movement of money within and out of Cyprus is a short-term solution that will simply put off the inevitable banking panic.

The measures could well result in long periods or even years of capital limits, similar to Argentina and Iceland, whose financial systems collapsed, thus hindering the nation’s chances of lasting economic recovery.

President
Nicos Anastasiades
is already confronting mass protests, as the country plunges into economic turmoil, with unemployment forecast to double to around 30 per cent. There is high risk of social unrest if Cypriots are made to feel even more fearful about the freezing or confiscation of their life savings.

The hasty creation of ‘‘one euro, two systems’’ inside the currency zone, with the euro in Cyprus being worth considerably less than elsewhere, has provoked widespread criticism, although it has been approved by Brussels.

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According to Guntram Wolff, deputy director of the Bruegel think tank, ‘‘the euro zone has now embarked on a process that endangers both the currency area and the single market’’.

‘‘A euro in Nicosia cannot be used to buy goods in Frankfurt without limits,’’ he wrote in the Financial Times. ‘‘Effectively, it means that a Cypriot euro is not a euro any more.’’

Attacks on the bailout process homed in on the controversial, dumped “Plan A", which proposed a levy on even small savers with less than €100,000, along with a bigger tax on richer depositors.

Economist Nicolas Véron, also at Bruegel, suggested capital restrictions were a necessary evil required since the “Troika" and European finance ministers so spectacularly mishandled the first bailout plan for Cyprus.

“We have not stopped paying for the aberrations of the initial rescue plan for Cyprus,’’ he told Les Echos. ‘‘The only regrettable aspect of this [new] agreement is the installation of capital controls . . .

‘‘This decision will be remembered as an aberrant moment of collective incompetence of all the actors. There was an inability to take into account the basic lessons of financial history, to know that one must never hit small depositors. It is utterly breathtaking."

Bickering over the fallout from the Cyprus meltdown extended to Britain, where Chancellor of the Exchequer
George Osborne
, under pressure to protect the savings of 20,000 British pensioners in Cyprus and up to 40,000 more expatriates, told Parliament that “it has not been well handled over the last 10 days’’.

Euro-watchers and markets continued to monitor the backlash to Dutch Finance Minister and euro group chairman
Jeroen Dijsselbloem
’s admission, later retracted, that Cyprus had set a new standard for future bailouts in the currency zone.

His comments were slapped down by central bank officials including, Benoît Coeuré, a member of the executive board.

“Jeroen Dijsselbloem was wrong to say what he said,’’ he said. ‘‘The experience of Cyprus is not a model for the rest of the euro zone because the situation had reached such a scale that it is not comparable to any other country.’’